Brexit Has Opened the Doors to Opportunistic Buyers

A look at how the referendum has impacted luxury property purchase in London and New York one month on

By Kathryn HopkinsOriginally published on July 22, 2016|Mansion Global|

While the world’s wealthy head off on their private planes to the likes of Ibiza and the south of France where they will no doubt continue to digest the Brexit news and consider their next financial moves over copious bottles of champagne, some property investors are looking to snap up bargains in the face of uncertainty.

A number of trophy central London homes are considerably cheaper now than they were just before the vote took place on June 23, thanks to jitters over the Brexit vote; unanswered questions about new Prime Minister Theresa May, who is just settling into the job; and a weaker currency.

For a dollar-backed buyer, for example, a five-bedroom home at One Hyde Park, London’s most expensive residential building, is now around $9.5 million cheaper than it was the day before the Brexit referendum, when it was listed at $72 million. A townhouse in tony Eaton Square, whose residents include the Duchess of York, a.k.a. Fergie, has also had $9 million slashed off its asking price in just one month.

Henry Pryor, a buying agent, has bid on $68 million worth of property on behalf of his clients since the Brexit vote, proving there is still demand—as long as the seller is realistic on pricing, while Trevor Abrahmsohn, managing director at Glentree International, told Mansion Global he has just overseen a “very large transaction” by a Chinese buyer.

“We’re getting a number of opportunists trying to benefit from the reduction of the price thanks to the weak pound. Prime and super prime prices are down 30% in actual values based on the highs of 2014, plus a 10% to 15% currency discount,” said Mr. Abrahmsohn, who sells homes on Bishops Avenue in Hampstead— dubbed Billionaires’ Row.

“You can say, ‘Where in the world can I buy a piece of English heritage for 45% less than I paid in 2014?’ ”.

Pound devaluation drawing foreign buyers

Charlie Willis, head of the London residential team at real estate brokerage Strutt & Parker, added that international demand has come mainly from the U.S., the Middle East and Asia. In London’s new development market, he has seen the greatest demand in the $4.5 million-plus price bracket, while for resales, inquiries have been across the board.

According to Mr. Willis, the devaluation of the pound has made property very attractive to committed overseas investors and expats, effectively providing an automatic discount off the purchase price. He believes this is where interest will come from over the next few months, as well as from segments of the domestic market where there is still often a personal need for people to move.

However, Lucian Cook, head of residential research at global real estate consultancy Savills, argued that while there have been some currency-fueled deals, it is still unclear whether the overall impact of the weak pound on the luxury sector will be as strong as some expect. One discouraging factor, he said, are high sales taxes that buyers must pay.

Since the end of 2014, these taxes, known as stamp duty, have been pushed up for owners of expensive properties and second homes. For this reason, he said, prospective purchasers will need to see appropriately priced properties in order to decide to buy.

Mr. Pryor agreed that buyers will be using political and economic uncertainty to negotiate better prices, saying, “I can’t remember a better time to negotiate a better deal—if you want to buy something, you hold all the aces.”

London buyers shopping in New York

As for New York, some high-end brokers are reporting an increase in inquiries from British buyers since the referendum took place on June 23. This, however, is unlikely to be the panacea to the slowdown in the city’s luxury market amid a glut of homes for sale and global economic uncertainty.

“I’m seeing a huge influx of buyers coming from London shopping for luxury homes in New York,” said Michael Graves, a broker at Douglas Elliman. “I showed a buyer a $19 million property this morning, and I’m under contract for another multi-million property, and the buyer is from London. We’re also seeing buyers from feeder markets that would go to London normally now coming to New York, as they view it as a safe haven.”